After job cuts, Nokia faces debt downgrade, takeover speculation

A day after Nokia (NYSE:NOK) announced wide-ranging job cuts, Moody's lowered the company's debt rating to junk status, and Bloomberg noted Nokia's plummeting stock price has made it a takeover target.

According to CNET, Moody's downgraded Nokia's long-term debt and the firm's outlook on Nokia remains negative. Separately, Bloomberg reported that Nokia's stock trades at a 38 percent discount to its net assets, which is the lowest the company has fallen since Bloomberg began tracking the stock in 1995.

After years of enjoying a solid position in the handset market with its mid and low-end phones, Nokia in recent years has been struggling to compete in high-end, touchscreen smartphones. The company last year launched its first Microsoft (NASDAQ:MSFT) Windows Phone smartphones, but sales of those devices haven't offset the precipitous sales declines in Nokia's Symbian and low-end phones, a situation that forced the company this week to announce 10,000 job cuts and a lowered second-quarter outlook.

According to new numbers from research firm ABI, Samsung and Apple captured 55 percent of global smartphone shipments in the first quarter of this year, and over 90 percent of the market's profits. "The question remains: Can anyone break away to become a strong third in this market?" the firm wrote.

Nokia's troubles have sparked speculation of a possible takeover. Samsung was recently rumored to be interested in purchasing Nokia, though Samsung quickly squashed those rumors. Analysts quoted by Bloomberg speculated on a number of possible transactions for Nokia, including a private equity purchase of the company, an acquisition of the company by partner Microsoft, or potentially a Chinese rival like Huawei or ZTE that would use a purchase of Nokia to expand its international sales.

"If Nokia doesn't come out of its funk within a year, Nokia is going to be finished," Charlie Wolf, an analyst at Needham & Co., told Bloomberg.

For its part, Nokia appears to be casting about for extra sources of cash. According to MarketWatch, Nokia CFO Timo Ihamuotila said Nokia is prepared to sell its patent portfolio to raise funds. Nokia in the first quarter recorded the value of its patents at around $630 million a year. Nokia is also selling its Vertu luxury brand.

For more:
- see this Bloomberg article
- see this MarketWatch article
- see this CNET article
- see this ABI release

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